How to use the Auto Lease Rate
- Enter the negotiated price, fees and any capitalised extras.
- Subtract your down payment and trade-in to get the capitalised cost.
- Enter the residual value and money factor.
- Read the depreciation charge, rent charge and total monthly payment.
How the calculation works
Monthly depreciation = (capitalised cost − residual) ÷ term. The rent charge = (capitalised cost + residual) × money factor — note that it adds the two values rather than subtracting, because interest accrues on the average balance outstanding over the lease. Money factor converts to APR by multiplying by 2,400, so 0.00185 is 4.44%.
The two levers worth negotiating are the capitalised cost and the money factor; the residual is set by the lender and is not negotiable. Residual is expressed as a percentage of MSRP, and a higher residual lowers your payment because you finance less depreciation — which is why slow-depreciating models lease cheaply. Watch for a marked-up money factor above the buy rate, acquisition and disposition fees, and the mileage allowance: excess mileage typically costs 15–25 cents per mile at lease end, enough to overturn the whole comparison against buying.
Payment = (cap cost − residual)/term + (cap cost + residual) × money factor ; APR = MF × 2400Source: Standard closed-end vehicle lease payment formula; money factor to APR conversion factor of 2,400.
Worked example
34,500 cap cost, 21,000 residual, 36-month term, 0.00185 money factor.
- Depreciation = (34,500 − 21,000)/36 = 375.00.
- Rent charge = (34,500 + 21,000) × 0.00185 = 102.68.
- Payment = 477.68 before tax.
- APR = 0.00185 × 2,400 = 4.44%.
About 478 a month pre-tax, at an effective 4.44% APR.
Frequently asked questions
How do I convert money factor to APR?+
Multiply by 2,400. A money factor of 0.0025 is 6% APR.
Can I negotiate the residual value?+
No, the lender sets it. Negotiate the vehicle price and the money factor instead.
Why does the rent charge add the residual?+
Interest accrues on the average balance over the term, which is roughly the midpoint between cap cost and residual.
What happens if I exceed the mileage allowance?+
You pay a per-mile excess charge, commonly 15–25 cents, at lease end.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.